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Fed orders caps on credit card late fees

The Federal Reserve on Tuesday ordered credit card issuers to cap penalty fees at $25 for a single violation within a six-month period and $35 for multiple transgressions.

The caps were not included in a proposed version of the regulations issued in March. But in its Tuesday ruling, the Fed said that it hoped the limits would strike a balance between deterring consumers from violations such as late payments and protecting them from onerous penalties.

In addition, the regulations would prevent card companies from issuing any penalty charges larger than the amount of the violation, a common consumer complaint. For example, if a card's spending limit is exceeded by buying a $2 cup of coffee, the penalty fee cannot exceed $2.

The ruling also bans inactivity fees that some card companies have charged if consumers do not make new purchases and prohibits multiple penalty fees for a single transgression.

The new rules were mandated by the sweeping credit card reform legislation passed by Congress last spring. They are slated to take effect Aug. 22.

So the "penalty" can't be above the expended amount but the late payment CAN be anything. You know the banksters will squeeze that loophole: "if they can show that a larger amount represents a "reasonable proportion" of any violations."

I guess we win some and lose some. The inactive fees and the penalties are ok. Have to look at other provisions in the new law to decide if it really was passed to protect us.

None of this should be taking place. The rules and conditions are set forth in the application. No different than the rules and regs are set forth in the home loan papers signed by millions that eventually defaulted. It appears that the DEMS still feel that people shouldn't be held accountable or pay their bills. No one forces anyone to take a credit card, home loan, car loan and so on. If you do so with out reading the contract then you have no one to blame but yourself.

The fees should be whatever the credit card companies want them to be. It's up to the consumer to shop around and determine which credit card is right for them, and there are loads of options out there. It's also up to the consumer to hold up their end of the agreement by paying their bills on time and not exceeding their credit limits.

What a bunch of whiners. They can't keep their finances straight, so here comes the government to the rescue. The way to get back at those "evil" credit card companies...Pay your bills in full, on time, and don't exceed your limit. If everyone actually did that, we wouldn't even be discussing this.

Come on. You are at your limit on a credit card (let's say $5K) and you charge $2 for a cup of coffee??? More likely you charge $6 for the specialty latte from the bistro. Finally, why are you at your credit card's max???? Pay off your bills. Get to a zero balance each month. This is credit. IT IS NOT FREE>>>>

Considering how eager credit card companies have always been to extend credit even to people with a history of default, I don't feel one bit sorry for the lenders. If they can charge a bad prospect 33% interest on a card with a $500 limit, thus potentially making hundreds of dollars more than the person can actually spend using the card, then they will try to do it. And when that person defaults because they can't see how they will ever get out from under, why should we feel outraged for the credit card company? They made their original $500 "loan" back long ago.

While it's true that people take on debt at their own risk, credit card companies extend credit at their risk and shouldn't be pardoned for making bad decisions either. Nor should they be allowed to profit from their bad decisions, but maybe that's asking too much considering how the government props them up when the market tanks.

libertarian logic: Don't regulate private businesses or cause private businesses to have to account for any doings in American life, because loopholes will always abound and the regulations will never be enforced.

Although many feel that it is the consumer's responsibility to decide if they want to apply and accept the terms and conditions; no one really is giving this much thought when it comes to the average folks that apply and are accepted because our Nation is built on a premise that 'we' must establish credit. These terms and conditions per corporate cons do make make that fine print easy to decipher when one fills out the application. Further when you fill it out there is no point in 'reading' all that lawyer laden jargon unless you indeed get approved. From there changes take place (which really should not happen unless it benefits the cardholder like lower interest rates) instead they make changes that make it hard to keep up when something out of the cardholder's control occurs. I really don't see the harm in making these credit cards carry a mandatory insurance if you will, that covers the payment when the person cannot due to illness, loss of work, or whatever reason comes up. Surely with the interest rate that is charged, they can afford to shave about 4-7% of that rate to apply toward a required insurance carrier so at least the card doesn't end up on the chopping block due to bankruptcy or no payment at all since many people will say screw it-they'll have to take the bad credit score because situations override their ability to maintain 'good' credit and it becomes a matter of paying survival bills versus non-essential bills. I can't tell you how common it is to see these credit card vendors promoting their cards to college students and students are not going to take the time (nor is any other regular joe going to sit there and read all the fine print). The fine print folks that balk about read the fine print are typically lawyers, business suits that have this come as second nature. Just like accountants understand tax laws and changes we as average citizens do not keep up with what they do and exercise and are familiar with on a daily basis. We rely on their knowledge to do our taxes with integrity so to say look it over and make sure all is correct is a joke because that is empowering the average citizen with the rank to 'grade' with understanding and if we could have understood the format and application to begin with then we surely would save ourselves the $80+up fees that are charged to complete our tax forms. This example has nothing really to do in comparison to the context but it does provide an example to show we are not the experts. We are just the average people that have average jobs and lives that only are trying to fulfill the above average status by playing by the rules that establish that status of success. Good credit means a car and a home and then the less stresses when we start a family so they will not struggle like our past generations did due to bad credit or no savings or money. We don't need corporations to nit-pick and nickle/dime us to ruins.

Global financial reforms are long overdue. And the mega-banks had to be stabilized, they are too interconnected in the financial system we are all dependent on. Now they should be broken up into smaller pieces so this cannot happen again.

I think the Federal Reserve is helping consumers. The banks have charged outrageous fees for late payments and over the limit infractions. Consumers have a feeling of helplessness when the bank decides to hike up fees. I simply stop using the card; but not everyone is in a position to "opt out". Because of the economy, lots of people use credit cards for necessary items like groceries, utility payments, ect. Credit is our way of life. We're not proud of being in this position...but we don't have a choice.

In short, capping is a good idea for everything including home mortgages. Why is it fair that a lender make 2/3 more than the purchase price of a home. If it was more reasonable like 1/4 or 1/3 then there would be more homes occupied and less falling apart. More people could rely on their own worth rather than getting in line for a gov. handout. People don't want to really resort to a gov. handout. They want to have that American Pride to obtain a dream on their own but greed by lenders and corporations have made it nearly impossible to compete when things happen that make it completely out of reach, either financially, systematically, personally or policy structured via monopolies. A consumer is much more apt to resume payment if it is focused on principle amount with a reasonable one time late fee over the course of 6 months (meaning not monthly) and if the interest is frozen or dropped to 1% accrue monthly until the card is paid off rather than adding more fees like all mentioned and tacking penalties, over limit fees and many other fees they can come up with for the sake of showing who's superior in the world of legal robbery. When these lenders show a human side then they may be surprised to see more of a return on real principle with a capped low interest, etc. in higher volume rather than going the punishment way of increasing and punishing those that are trying to do the right thing.

Having credit is essential in this country whether some of you people like it or not. If you ever want to buy a house or even get a car loan then well guess what, your going to need to use a credit card.

Late fees can happen to any of us including the responsible consumers, ever forget to fully execute your online payment which was only 1 more click away, or ever have a check lost in the mail? This isn't about people needing to be more responsible spenders, the issue is regulating these greedy banks who think they can get away with what ever they feel like.

I'm a college graduate and a responsible consumer and I manage 2 credit cards and a car loan. I have been screwed a couple times over the past 6 years by late payments fees just because small errors that anyone can make. Not that I'm going to make a habit out of being late on my bills, but I sure would love to be charged fairly next time my check gets lost in the mail or something.

Try to see the bigger picture here, I think it's way too easy and ignorant just to point at the poor people for everything that goes wrong in this country, believe it or not most of the wealth is in the hands of a smaller percentage of the population and we're in a financial crisis.. hmmm wonder what that's all about?